Interest Rate Outlook for 2022

Hi, I am Stewart Heath with Harvard Grace.

Today I would like to discuss general food inflation.  We’ve not seen a lot of moving on, but there’s a lot of talk about that. Energies are up a huge amount over a year ago, impacting a lot of people around the globe.

James Bullard, President and CEO of the Federal Reserve Bank of St. Louis, who’s not a voting member of the fed, but will be next year, has said that he thinks there will be two interest rate rises next year. Maybe those are core points, more or less next year. Then we have asset managers across the globe who thinks that we will be in low rates forever.

I didn’t start my career with low rates. My first house was financed at a 9.75% and I thought that was a good deal. In the last 30 years, we’ve seen rates fall lower, lower, lower, and now we’re really at historic lows. There are some asset managers who are planning on being in this low interest rate forever in this environment, even if the fed does raise rates twice next year, we’re still in historic low-rate territory.

The 30-year bond and tenure bond are up a little over last year. These are signs of a heating up economy. It’s likely to see the fed raise interest rates too, so that the economy doesn’t overheat as they like to say. What impact will this have on your business? Your investing with low rates has already given us a season of cap rate compression in the real estate market, which is driving valuations for multifamily deals and self-storage deals down into the low single digits. It’s very concerning to some people like us who would like to see 10 caps and things like that on investments that we buy. There are all kinds of impacts, but if we start to see rising interest rates, coupled with rising energy prices, we should be prepared for a slowdown in the overall economy.

If you don’t agree with me, let me know. Let’s engage on this platform. If you do agree with me, let me know. These are my opinions and how I see the world. Thanks a lot for watching. Take care. Until next time!

Here are a few resources I gathered my information from: James Bullard, Jerome Powell, and Julian Howard.